Robert Friedland’s Ivanhoe Mines (IVN:TSX) which has come under pressure recently due to capital concerns and a South African platinum industry that is in severe turmoil, has relieved some pressure today by announcing the closing of their bought-deal financing, exercise of the full greenshoe and closing of a concurrent $25 million private placement with their Executive Chairman.
The company raised a total of $125 million in the bought deal by issuing 83 million shares at $1.50 per share, with an additional 12.5 million shares being exercised via the underwriter’s greenshoe (for total proceeds of $143.75 million). Mr. Friedland also closed his participation in a concurrent financing for an additional $25 million.
He now owns over 26% of the company or 164.6 million shares. He has 30 days to invest an additional $3.75 million as part of his own over allotment option.
Mr. Friedland continues to put his money where his mouth is by participating in his company’s development. In October, Mr. Friedland subscribed for $25 million of a $108 million financing completed at $2.00 per share. $50 million of his personal wealth in just two financings in less than 12 months; I think it’s safe to say Mr. Friedland is a believer.
A week ago, the company announced a significant milestone on their Platreef platinum project in South Africa, which went largely unappreciated by the market. Ivanhoe received their full mining right permit issued by the South African authorities which allows Mr. Friedland and his team to continue to develop the project’s huge infrastructure ($1.7 billion initial capex).
The mining right was delayed and, as a result, was the cause of much investor concern because if they had not received the right by the end of May, they would have had to shut down development. This would have resulted in material delays for its development. That was avoided, but was not rewarded by the market.
Investors turned to lack of working capital on the balance sheet for the development of Kipushi and Kamoa (both in the Democratic Republic of Congo; Kipushi being one of the world’s most high-grade underdeveloped zinc mines in the world and Kamoa being one of the largest and highest-grade copper projects in the world).
Although they had just shy of $150 million in cash on their balance sheet last quarter, over $145 million of that was restricted to Platreef (as part of the deal with the Japanese consortium which saw them buy a 10% stake in the project for $300 million; putting a value on Platreef of $3 billion).
Now Ivanhoe is funded for the continued advancement of all three of their world-class projects this year.
Although their was a hint of potentially spinning out the South African platinum assets, in order to concentrate investor appetite, nothing more has developed there yet. Spinning out the Platreef project from the two DRC base metals projects could provide platinum investors with a clear investment opportunity and allow base metals speculators to focus solely on Kipushi and Kamoa. This could allow specific investors to focus on the assets they like (platinum investors for Platreef could be very different than those interested in Kamoa and Kipushi).
This could prove to be a 1+1 = 3 scenario.
Underground work at Kipushi can now continue with the next stage of the dewatering which will enable them to replace the winding ropes on the shaft five conveyances and re-establish the main pumping station in shaft five at the 1,210-metre level for continuing dewatering.
At Kamoa, the company is working to advance towards a pre-feasibility study which will build on and improve the 2013 PEA. They will continue with exploration efforts at Kamoa as well, looking to delineate more of the extremely high-grade parts of the deposit.
Disclosure: I am long Ivanhoe and participated in this bought-deal financing. As a result I am biased. This is not investment advice. Always do your own due diligence.